Global sourcing is key for Asda

Asda is set to work much more closely with parent company Walmart on sourcing products globally, according to Asda president and chief executive Andy Bond.

Walmart recently announced the creation of Global Merchandising Centres as a key element of its new global sourcing strategy.

Speaking at the announcements of Asda’s annual results, Bond said: “You won’t be surprised to know that Asda is taking an active role in this global strategy – with the George team in Lutterworth acting as the global hub for fashion. I believe this new structure will enable us to unlock the full potential of the company’s scale.”

In addition to the Global Merchandising Centres, Walmart is working on consolidating the sourcing of goods more effectively and has signed a strategic agreement with Li & Fung in China. In the UK, it has purchased International Produce Ltd.

IPL was formed just over five years ago as a dedicated supply partner for Asda’s produce business, importing among produce such as melons, grapes and citrus fruits. It is now one of the largest importers of produce in the UK.

Bond said that taking it in-house would create huge cost saving opportunities for Asda, as it started to benefit from the increased volumes needed to supply other Walmart businesses around the world. IPL already sources citrus for stores in the US and avocados for stores in Japan.

“It is now extending its activities into a wider range of products such as imported cheese, cooked meats, pate and pasta. So, through a combination of better joint sourcing of product with Walmart; the introduction of new global merchandising centres; and removing the middleman wherever possible, we’re set to unlock the full potential of our relationship with Walmart, leveraging its global scale far more effectively, which in turn will lead to lower prices for customers,” he said.

Bond also highlighted the savings tha Asda has made in its supply chain. “In terms of our operating model we’ve delivered a step change in cost savings, embedding our save £1 a day initiative so that it is now an integral part of every colleague’s day job,” he said.

“You can get a sense of the scale of our commitment to reducing costs from the progress we’ve made in our distribution network to maximise the efficiency of our fleet. Compared to 2005, our colleagues are now delivering 400m more cases each year, but driving 19m fewer miles thanks to the introduction of double-deck trailers, reverse logistics from our stores, and a more efficient distribution network.”

The retailer is also planning to open more small stores – under 25,000 sq ft. Until now its strategy has been to focus on large out of town sites and has been slower than some of its competitors to get into the market for smaller local stores.